Why Canadian Tire Corporation Limited Is Soaring Over 5%

Canadian Tire Corporation Limited (TSX:CTC.A), one of Canada’s largest retailers, announced its fiscal 2017 fourth-quarter and full-year earnings results this morning, and its stock has responded by soaring over 5% in early trading. Let’s break down the results and the fundamentals of its stock to determine if we should be long-term buyers today. The results that ignited the rally Here’s a breakdown of six of the most notable statistics from Canadian Tire’s 13-week period ended December 30, 2017, compared with its 13-week period ended December 31, 2016: Metric Q4 2017 Q4 2016 Change Retail sales $4,599.3 million $4,383.5 million…

To keep reading, enter your email address or login below.

Register by giving us your email below to continue reading all of the content on the site. Also receive a free Email Newsletter from the Motley Fool. (You may unsubscribe any time.)

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls.
I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.

Canadian Tire Corporation Limited(TSX:CTC.A), one of Canada’s largest retailers, announced its fiscal 2017 fourth-quarter and full-year earnings results this morning, and its stock has responded by soaring over 5% in early trading. Let’s break down the results and the fundamentals of its stock to determine if we should be long-term buyers today.

The results that ignited the rally

Here’s a breakdown of six of the most notable statistics from Canadian Tire’s 13-week period ended December 30, 2017, compared with its 13-week period ended December 31, 2016:

Metric

Q4 2017

Q4 2016

Change

Retail sales

$4,599.3 million

$4,383.5 million

4.9%

Revenue

$3,964.0 million

$3,641.0 million

8.9%

Gross profit

$1,393.9 million

$1,296.7 million

7.5%

Adjusted EBITDA

$558.5 million

$506.6 million

10.2%

Net income attributable to shareholders of Canadian Tire

$275.7 million

$246.8 million

11.7%

Diluted earnings per share (EPS)

$4.10

$3.46

18.5%

And here’s a breakdown of six notable statistics from Canadian Tire’s 52-week period ended December 30, 2017, compared with its 52-week period ended December 31, 2016:

Metric

Fiscal 2017

Fiscal 2016

Change

Retail sales

$14,980.7 million

$14,370.6 million

4.2%

Revenue

$13,434.9 million

$12,681.0 million

5.9%

Gross profit

$4,638.4 million

$4,392.5 million

5.6%

Adjusted EBITDA

$1,693.8 million

$1,561.8 million

8.5%

Net income attributable to shareholders of Canadian Tire

$735.0 million

$669.1 million

9.9%

Diluted EPS

$10.67

$9.22

15.7%

What should you do with Canadian Tire’s stock today?

It was an outstanding quarter and year for Canadian Tire, highlighted by EPS growth of over 15%, so I think the market has responded correctly by sending its stock soaring; I also think the stock still represents a very attractive investment opportunity for the long term for two primary reasons.

First, it’s still attractively valued. Even after the +5% pop, Canadian Tire’s stock trades at just 16.2 times fiscal 2017’s diluted EPS of $10.67 and only 14.9 times the consensus estimate of $11.56 for fiscal 2018, both of which are inexpensive given its strong growth rates and its targeted annual EPS growth of 10% or more through 2020.

Second, it’s a dividend aristocrat. Canadian Tire pays a quarterly dividend of $0.90 per share, representing $3.60 per share annually, which gives it a solid 2.1% yield. It’s also very important to note that the retail giant’s 38.5% dividend hike in November has it on track for 2018 to mark the eighth straight year in which it has raised its annual dividend payment, and I think its very strong financial performance will allow this streak to continue for decades.

With all of the information provided above in mind, I think Foolish investors seeking exposure to the retail industry should consider Canadian Tire to be one of the best investment options in the market today.

Overwhelmed by how many public companies there are to choose from in Canada? Motley Fool Canada Director of Research Iain Butler has you covered. Once a month, Iain and the rest of our team at Stock Advisor Canada reveal their five favourite Canadian stocks for new money now.

Considering they’ve walloped a “stuck in the mud” TSX by 10% over the past 4 years with truly life-changing winners like Shopify (up 236%, more than tripling your money), you’ll probably want to have your front-row seat reserved when our next five “Best Buys Now” are released – exclusively on behalf of Stock Advisor Canada members.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.